One of the best tools to identify market trends is trendline (trendline). Although there is a very simple usage, the efficiency is very high. However, the market does not always show the trend accurately and clearly. Moreover, many lines can be drawn on the price chart to show trends. This makes many traders feel confused. So How to draw trendline lines is the most accurate? This article will help you have a right mindset about trendlines, thereby giving you guidance to help you confidently draw trendlines in any situation.
What is a trendline?
Right from its original meaning in English you have understood, trendline is the trend line. This is one of the tools to identify market trends. By using a straight line connecting the top or the bottom of the price line, from which the trend outlines give us the most intuitive view of the overall direction of the price.
>> To learn more about the methods to identify market trends, please read here.
In addition to being used to identify market trends, an important application of trendlines is to identify support and resistance levels. This means that whenever the price touches a trendline, it tends to bounce back. If the price breaks the trendline in the opposite direction, it is likely that the price will reverse.
There are 3 types of trendline, corresponding to the increasing, decreasing and moving sideways. However, we usually only consider two cases: the rising trendline and the decreasing trendline.
Thinking when drawing trendlines (trend lines)
You must first understand the concept of trends correctly. Trends refer to a movement of the whole in a certain direction. It does not require the absolute accuracy of all individuals. It only speaks of a general trend of the whole as a whole.
Should we draw trend lines through beards?
With the above way of thinking, there is no need for a master of technical analysis to teach you how to draw trendlines in the most accurate way. You are your best teacher!
Well, with your confidence, you can give a definitive answer:
Not only can you draw trendlines through the beard, you can even draw it through the body of the candle!
And remember: Never try to draw trendlines too accurately. In fact, you should only treat it as a region rather than a straight line!
How many points are needed to draw a trend line?
Basically, it only takes two points to connect to form a straight line, and can be considered as a trendline. But such a trend line will be quite weak! I recommend you use 3 or more points to draw a trendline.
In general, the more times the price touches the trendline and then turned out, the more that trend is strengthened. The support and resistance levels defined by the trendline then become stronger.
How to draw up trendlines
This is a simple idea, but many of you are easily confused!
When the price is trending upwards, you can draw two lines along the trend, forming a trend channel. One line connects the vertices, the other connects the bases. But the question is: Which is more important? Which road is the trendline?
To answer this question, you also need logical thinking. Trendlines are not only used to identify trends, but also to create support and resistance levels. Therefore, it also works to determine when the trend is broken and reversed.
So in an uptrend, the trendline will be the way through the bottom, not the way through the peaks.
In actual statistics, it is also seen that, in an uptrend, prices touch the path through the bottoms more often than the line connecting the peaks.
When the price breaks the trendline that crosses the troughs, it is a sign of a trend reversal.
When price breaks the price channel (the way through peaks) and goes up sharply in an uptrend, it doesn't make much sense. This line usually works to create a price channel for day traders and scalping traders to take advantage of the small fluctuations of the market to reverse the trend a bit. However, if it is a price channel within a large time frame then it is also of considerable value, since then it will create a small downward corrective effect.
How to draw falling trendlines
Once you understand how to draw a rising trendline, it is simple to draw a decreasing trendline. So this part I will not say more, but always:
In a downtrend, the trendline will be the way through the peaks.
You have just read:How to draw trendlines (trend lines) most accurately ”.
Author: Pham Khuong
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